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Greene King PLC (GNK)

  Print      Mail a friend       Annual reports

Tuesday 19 July, 2011

Greene King PLC

Recommended cash offer

RNS Number : 6300K
Greene King PLC
19 July 2011
 



19 July 2011

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (DIRECTLY OR INDIRECTLY) IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR ANY OTHER JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

 

Recommended cash offer

by

Greene King plc

for

The Capital Pub Company Plc

Summary

·                The Boards of Greene King plc ("Greene King") and The Capital Pub Company Plc ("Capital Pubs") are pleased to announce that they have reached agreement on the terms of a recommended cash offer for the entire issued and to be issued share capital of Capital Pubs.

·                 Under the terms of the Offer, Capital Pubs' Shareholders will be entitled to receive 235pence per Capital Pubs Share in cash.

·                 The Offer values the entire issued and to be issued share capital of Capital Pubs at approximately £70 million and implies an enterprise value of £93 million.

·                 The Offer Price represents a premium of approximately 51 per cent. to the Closing Price of 155.5 pence for each Capital Pubs Share on 16 June 2011, the last dealing day prior to the commencement of the Offer Period.

·                 The Offer Price is inclusive of the final dividend of 2.25 pence proposed by the Capital Pubs' Board on 21 June 2011 and as a result the final dividend will no longer be proposed and the AGM, which was originally proposed to be held on 17 August 2011, has been deferred.

·                 The Capital Pubs' Board has agreed unanimously to recommend Capital Pubs' Shareholders to accept the Offer, as they have themselves irrevocably undertaken to do (or procure to be done) in respect of their entire beneficial holdings of Capital Pubs Shares amounting to, in aggregate, 2,634,650 Capital Pubs Shares, representing approximately 9.77 per cent. of the current issued share capital of Capital Pubs.

·                 In aggregate, Greene King has received irrevocable undertakings to accept the Offer, or to procure that any other person accepts the Offer, in respect of a total of 9,083,176 Capital Pubs Shares, representing approximately 33.68 per cent. of the issued share capital of Capital Pubs. All of these commitments would remain binding in the event that a competing offer is made.

·                The directors of Greene King believe that the acquisition of Capital Pubs not only represents an opportunity to maintain and develop the existing strengths of Capital Pubs as part of Greene King, but also an opportunity to create an even stronger pub retailer within the attractive and growing premium eating and drinking out market in London. The combined business will operate approximately 250 pubs within Greater London and Greene King sees significant benefits from operating Capital Pubs alongside its recent acquisition, Realpubs, and its existing premium London pubs. There are also specific opportunities to grow food and accommodation participation within Capital Pubs.

·                 The acquisition of Capital Pubs is expected to be earnings enhancing to Greene King in the first full year of trading and will generate returns above Greene King's cost of capital in year one (when reading this sentence, please refer to the section below headed "CAUTIONARY NOTICE REGARD FORWARD LOOKING STATEMENTS" and note that this statement is not a profit forecast and should not be interpreted to mean that Greene King's future earnings per share will necessarily match or exceed the historical published earnings per share).

·                 The Capital Pubs Directors, who have been so advised by PricewaterhouseCoopers, consider the terms of the Offer to be fair and reasonable.  In providing its advice to the Capital Pubs Directors, PricewaterhouseCoopers has taken into account the commercial assessments of the Capital Pubs Directors.

Commenting on the Offer, Rooney Anand, Chief Executive Officer of Greene King, said:

"The proposed acquisition represents another firm step as we continue to expand our presence in London.  Capital Pubs would bring a further 34 premium pub assets and take our Greater London estate to approximately 250 at a time when London is outperforming the national pub market.

This offer represents a fair price for a high quality, largely freehold pub estate.  Capital Pubs is a premium London pub company that fully meets our criteria as we continue to progress our retail expansion strategy.  Capital Pubs' estate fits well within the Greene King portfolio and we intend to combine it with our recently acquired Realpubs business, thereby generating attractive cost and revenue synergies".

Clive Watson, Chief Executive Officer of Capital Pubs, said:

"Greene King is an excellent cultural fit with Capital Pubs and will be a good home both for the business and for our staff. Greene King is renowned for nurturing the businesses it acquires and I have every confidence that Capital Pubs will continue to develop under its ownership. We have recommended Greene King's deal to shareholders as we believe it reflects both our high quality business and its prospects".

At 8am BST today, Greene King will host a conference call for analysts to discuss the transaction. Details of the call are available from Jennifer Alves, Financial Dynamics, on +44 207 269 7176.

The supporting presentation can be accessed through the Investor Relations section of the company's website at www.greeneking.co.uk

ENQUIRIES

For further information contact:

Greene King

 

Rooney Anand, Chief executive

+ 44 1284 763222

 

 

Lazard (financial adviser to Greene King)

 

William Rucker

+44 207 187 2000

Paul Gismondi

+44 207 187 2000

 

 

Deutsche Bank (financial adviser and corporate broker to Greene King)

 

James Agnew

+44 207 545 8000

Steven Varlakhov

+44 207 545 8000

Andrew Smith

+44 207 545 8000

 

 

Financial Dynamics (PR adviser to Greene King)

 

Ben Foster

+ 44 207 831 3113

 

 

Capital Pubs

 

Clive Watson

+ 44 207 589 4888

Nick Collins

+ 44 207 589 4888

 

 

PricewaterhouseCoopers (financial adviser to Capital Pubs)

 

Sean Williams

+44 207 583 5000

Gerry Young

+44 207 583 5000

Mark Sweeting

+44 207 583 5000

 

 

Panmure Gordon (UK) Limited (corporate broker to Capital Pubs)

 

Adam Pollock

Andrew Godber

+44 207 459 3600

+44 207 459 3600

 

 

College Hill (PR adviser to Capital Pubs)

 

Justine Warren

Matthew Smallwood

+44 207 457 2020

+44 207 457 2020

 

This summary should be read in conjunction with the full text of the following announcement. 

The conditions to, and certain further terms of, the Offer are set out in Appendix I. The sources and bases for certain information contained in this announcement are set out in Appendix II. Details of irrevocable undertakings received by Greene King and certain related arrangements are set out in Appendix III. Certain definitions and terms used in this announcement are set out in Appendix IV.

Lazard & Co., Limited is acting exclusively for Greene King in connection with the Offer and will not be responsible to any person other than Greene King for providing the protections afforded to customers of Lazard & Co., Limited or for providing advice in relation to the Offer or any other matter referred to in this announcement.

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Services Authority. Details about the extent of Deutsche Bank AG's authorisation and regulation by the Financial Services Authority are available on request. Deutsche Bank AG, London Branch is acting as financial adviser and corporate broker to Greene King and no one else in connection with the contents of this announcement and the Offer and will not be responsible to anyone other than Greene King for providing the protections afforded to clients of Deutsche Bank AG, London Branch, nor for providing advice in relation to the Offer or any matters referred to herein.

PricewaterhouseCoopers is acting exclusively for Capital Pubs in connection with the Offer and will not be responsible to any person other than Capital Pubs for providing the protections afforded to clients of PricewaterhouseCoopers or for providing advice in relation to the Offer or any other matter referred to in this announcement.

Panmure Gordon (UK) Limited is acting exclusively for Capital Pubs in connection with the Offer and will not be responsible to any person other than Capital Pubs for providing the protections afforded to clients of Panmure Gordon (UK) Limited or for providing advice in relation to the Offer or any other matter referred to in this announcement.

This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for, securities. Any acceptance or other response to the Offer should be made only on the basis of information referred to in the Offer Document which Greene King intends to despatch shortly to Capital Pubs' Shareholders and, for information only, to holders of options/awards under the Capital Pubs Share Schemes.

The availability of the Offer to persons who are not resident in the United Kingdom may be affected by the laws of their relevant jurisdiction. Such persons should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. Further details in relation to overseas shareholders will be contained in the Offer Document.

The Offer referred to in this announcement will not be made, directly or indirectly, in, into or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facilities of a nationals securities exchange of, the United States, Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of such jurisdiction.  This announcement does not constitute an offer in the United States, Canada, Australia or Japan or any such other jurisdiction and the Offer will not be capable of acceptance by any such use, means, instrumentally or facilities or otherwise from or within the United States, Canada, Australia or Japan or any such other jurisdiction.  Accordingly this announcement is not being, and should not be, mailed, transmitted or otherwise distributed, in whole or in part, in or into or from the United States, Canada, Australia or Japan or any such other jurisdiction.

Capital Pubs' Shareholders (including, without limitation, nominees, trustee or custodians) must not forward this announcement to the United States, Canada, Australia, Japan or other such jurisdiction.

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

This announcement contains certain forward looking statements with respect to the financial condition, results of operations and business of Capital Pubs or Capital Pubs Group and certain plans and objectives of the boards of directors of Capital Pubs and Greene King.  These forward looking statements can be identified by the fact that they do not relate to historical or current facts.  Forward looking statements often use words such as "anticipate", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or other words of similar meaning.  These statements are based on assumptions and assessments made by the boards of directors of Capital Pubs and Greene King in the light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate.  By their nature, forward looking statements involve risk and uncertainty and the factors described in the context of such forward looking statements in this announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward looking statements.

Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this announcement.  Capital Pubs and Greene King assume no obligation to update or correct the information contained in this announcement.

DEALING DISCLOSURE REQUIREMENTS

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of Capital Pubs must make an Opening Position Disclosure following the commencement of the offer period. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of Capital Pubs. An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement of the offer period. Relevant persons who deal in the relevant securities of Capital Pubs prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent.  or more of any class of relevant securities of Capital Pubs must make a Dealing Disclosure if the person deals in any relevant securities of Capital Pubs. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of Capital Pubs, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of Capital Pubs, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures and Dealing Disclosures must also be made by Capital Pubs, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

 

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.

 

The defined terms used in this section "Dealing Disclosure Requirements" are defined in the Code which can be found on the Panel's website.

 

This announcement will be available on Greene King's website at www.greeneking.co.uk and Capital Pubs' website at www.capitalpubcompany.com by no later than 12 noon on 20 July 2011.

 

19 July 2011

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (DIRECTLY OR INDIRECTLY) IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR ANY OTHER JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

Recommended cash offer

by

Greene King plc

for

The Capital Pub Company Plc

1.         Introduction

The Boards of Greene King ("Greene King") and The Capital Pub Company Plc ("Capital Pubs") are pleased to announce that they have reached agreement on the terms of a recommended cash offer for the entire issued and to be issued share capital of Capital Pubs.

2.         The Offer

The Offer, which will be subject to the conditions and certain further terms set out in Appendix I, and to be set out in full in the formal Offer Document and Form of Acceptance, will be made on the following basis:

For each Capital Pubs Share

235 pence in cash

 

The Offer Price represents a premium of approximately 51 per cent. to the Closing Price of 155.5 pence for each Capital Pubs Share on 16 June 2011, the last dealing day prior to the commencement of the Offer Period.

The Offer values the entire issued and to be issued share capital of Capital Pubs at approximately £70 million and implies an enterprise value of £93 million.

Capital Pubs Shares will be acquired by Greene King pursuant to the Offer fully paid and free from all liens, equities, charges, equitable interests, encumbrances, rights of pre-emption and other third party rights and/or interests of any nature whatsoever and together with all rights attaching to them, now or in the future, including the right to receive and retain all dividends, interest and other distributions declared, paid or made in the future.  If any dividend, or other distribution in respect of Capital Pubs Shares is declared, paid or made on or after the date of this announcement, Greene King reserves the right to reduce the consideration payable for the Capital Pubs Shares under the terms of the Offer by reference to the amount per Capital Pubs Share of such dividend or distribution.  The Offer Price is inclusive of the final dividend of 2.25 pence proposed by Capital Pubs' Board on 21 June 2011 and as a result the final dividend will no longer be proposed and the AGM, which was originally proposed to be held on 17 August 2011, has been deferred.

3.         Recommendation

The Capital Pubs Directors, who have been so advised by PricewaterhouseCoopers, consider the terms of the Offer to be fair and reasonable.  In providing its advice to the Capital Pubs Directors, PricewaterhouseCoopers has taken into account the commercial assessments of the Capital Pubs Directors. Accordingly, the Capital Pubs' Board has agreed unanimously to recommend Capital Pubs' Shareholders to accept the Offer, as they have themselves irrevocably undertaken to do (or procure to be done) in respect of their entire beneficial holdings of Capital Pubs Shares amounting to, in aggregate, 2,634,650 Capital Pubs Shares, representing approximately 9.77 per cent. of Capital Pubs' current issued share capital.

4.         Irrevocable undertakings

Greene King has received irrevocable undertakings in respect of, in aggregate, 9,083,176 Capital Pubs Shares, representing approximately 33.68 per cent. of Capital Pubs' current issued share capital.

Further details of these irrevocable undertakings are set out in Appendix III to this announcement.

 

5.         Information on Greene King

Greene King has been operating pubs and brewing beer from Bury St Edmunds for over 200 years. It employs around 20,000 people across the UK and currently comprises three main businesses: Retail, which includes all Greene King's managed pubs and restaurants; Pub Partners, which  includes all of Greene King's tenanted and leased pubs; and Brewing and Brands, which includes Greene King's brewing and distribution assets, and its industry-leading portfolio of ale brands.

Greene King recently reported record revenue of £1,042.7 million in the year ended 1 May 2011 and generated operating profit of £222.0 million and profit before tax and exceptional items of £140.0 million.

Greene King's strategy is to generate sustainable long-term earnings and dividend growth through expanding and improving the overall quality of its Retail estate, by reducing the size but improving the quality and profit sustainability of its tenanted and leased estate, and by increasing investment in its leading UK ale brands, through the most cost effective brewing and distribution model in the industry.

Greene King has been amongst the leading performers within the pubs and beer sector for many years. Organic growth is driven by a focus on delivering value, service and quality across each business and by driving increased participation in growth areas such as the eating out market, staying out market and specific drink categories such as wine, coffee and soft drinks.

Retail, is split into two businesses: Destination Pubs, home for Retail brands such as Hungry Horse, Old English Inns and Loch Fyne Restaurants; and Local Pubs, segmented into Premium, Mainstream and Value sites, in both the high street and in communities across the UK. Like-for-like sales in Retail grew 4.9 per cent.  in the year to 1 May 2011.

Pub Partners, its tenanted and leased business, was the first major company in the sector to return to profit per pub growth following the smoking ban, credit crunch and recession, and is now focusing on agreement innovation and increased licensee offer management to drive sustainable profit growth for both Greene King and its licensees.

Greene King Brewing and Brands is the leading cask ale brewer in the UK with four category leading ale brands: Greene King IPA, the UK's no.1 cask ale, Old Speckled Hen, the UK's no.1 premium ale, Abbot Ale, the UK's no.1 premium cask ale and Belhaven Best, Scotland's no.1 ale brand.

6.         Information on Capital Pubs

Capital Pubs was founded in December 2000 by pub entrepreneurs David Bruce and Clive Watson with a vision to start a new venture which would acquire and operate predominantly freehold, managed pubs in London.

Capital Pubs was admitted to AIM in June 2007. Capital Pubs has a portfolio of 34 pubs as at 18 July 2011 of which 29 are freeholds (including two which are leaseholds with the option to purchase the freeholds at a fixed price with pre-emption rights and one in which Capital Pubs has a 40 per cent. interest), and 5 are leaseholds. In addition, Capital Pubs operates one pub under a management agreement.

In the financial year ended 26 March 2011, Capital Pubs reported Revenue of £27.2m, House EBITDA of £8.95m, Adjusted EBITDA of £6.8m, Adjusted Profit Before Tax of £4.1m and Net Assets of £40.8m.

7.         Background to the recommendation

                 On 17 June 2011, Fuller Smith and Turner plc ("Fuller's") announced that it had recently approached Capital Pubs' Board with an indicative proposal to acquire the entire issued and to be issued share capital of the company at a price of 200 pence per share.  Capital Pubs subsequently announced that its board, along with its financial adviser, PricewaterhouseCoopers, had considered carefully the Fuller's proposal and had concluded that the proposal substantially undervalued Capital Pubs and its future prospects and did not form the basis upon which the board would engage further with Fuller's.

In the period after these announcements, Capital Pubs' Board held discussions with several major shareholders.  As a result, the board concluded that, although Capital Pubs had good prospects as an independent company, its shareholders would welcome the opportunity to consider an offer at a significant premium to the 200 pence per share indicative offer proposed by Fuller's.

In July 2011, Capital Pubs' Board received approaches from a number of third parties regarding their potential interest in making an offer for the company. Capital Pubs' Board entered into detailed discussions with two trade acquirers and gave these parties access to company information to complete their confirmatory due diligence.

The offer from Greene King is the result of this process.  It was a condition of Greene King proceeding with its offer that firm commitments to accept the offer were received in respect of a minimum of 30 per cent. of Capital Pubs' issued share capital.

The Offer Price of 235 pence per Capital Pubs Share offered by Greene King represents a 51 per cent. premium to the Closing Price of 155.5 pence per Capital Pubs Share on 16 June 2011 and a 70 per cent. premium to the average closing price of 138 pence per Capital Pubs Share for the six month period prior the commencement of the Offer Period. Capital Pubs' Board believes that the Offer Price takes proper account of Capital Pubs as a high quality, freehold led, London pub company, and allows Capital Pubs Shareholders to realise an attractive valuation in cash for their Capital Pubs Shares.

 

8.         Background to and reasons for the Offer

Greene King's objective is to be known as the best pub retailer and brewer in the UK. The addition of Capital Pubs' 34 premium, high quality, London and mainly freehold pubs will help to move Greene King closer to this goal. Greene King has a strong track record of successful acquisitions and fully expects the acquisition of Capital Pubs to add to that record and views the model as complementary to Greene King's existing London estate.

Greene King is focused on growing its strongly performing business, Greene King Retail, by both industry-leading organic growth and by adding new sites, while improving the overall quality of the estate. The acquisition of Capital Pubs adds 34 sites to Greene King's Retail estate, taking the total number of pubs to approximately 950 and accelerating its stated strategy to increase the estate to around 1,100 sites.

At the same time, Greene King is focused on improving its exposure to the long-term growth of the eating out market and to the profitable and attractive premium wet-led sector. Capital Pubs' food participation is 23 per cent. and there is a significant opportunity to increase further participation within the Capital Pubs estate.

Capital Pubs' pubs are predominantly freehold London assets which Greene King believes will grow in value over the long-term ahead of the market. Of the 34 pubs, 29 are freehold (including two pubs which are owned leasehold but over which Capital Pubs has options to purchase the freeholds at a fixed price with pre-emption rights).  In addition,  Greene King owns the freehold of one of Capital Pub's leasehold pubs. Greene King is aware of a pipeline of additional assets that it could access to further grow its London estate, although this has not been relied upon in Greene King's valuation of Capital Pubs.

London is a very important long-term market for Greene King and the acquisition of the 34 Capital Pubs pubs takes the total within Greater London to approximately 250. It is especially beneficial over the next 12 months due to the 2012 London Olympics, but in the longer term, we expect London to continue to outperform the national pub market.

In particular, this acquisition improves Greene King's presence in attractive areas of London, including the South and South West, where Greene King is currently under represented.  There are 20 sites in South and South West London within the Capital Pubs estate.

Greene King expects to achieve at least £2 million of synergies by the end of the first full year post acquisition.  Around £1 million will come from reducing central overheads and £1 million from a combination of purchasing synergies, revenue synergies, by combining Capital Pubs with its existing premium London estate and its recent Realpubs acquisition, and additional overhead recovery in its Brewing and Brands division. 

The acquisition of Capital Pubs is expected to be earnings enhancing to Greene King in the first full year of trading and is expected to generate returns above Greene King's cost of capital in year one (when reading this sentence, please refer to the section above headed "CAUTIONARY NOTICE REGARD FORWARD LOOKING STATEMENTS" and note that this statement is not a profit forecast and should not be interpreted to mean that Greene King's future earnings per share will necessarily match or exceed the historical published earnings per share).

9.         Current Trading and Prospects

(a)

Greene King current trading

 

In the eight weeks to 26 June 2011, Retail like-for-like sales were up 3 per cent. after adjusting for the impact of last year's World Cup, Pub Partners average EBITDA per pub was up 1 per cent. and core own-brewed volumes in Brewing & Brands were down 2 per cent.

(b)

Capital Pubs current trading

 

In the 52 weeks to 26 March 2011, Capital Pubs had a total estate of 31 pubs (plus one pub operated under a management contract) and recorded revenue of £27.2 million and House EBITDA of £8.95 million, implying a House EBITDA margin of 32.9 per cent.

 

However, these results do not fully reflect the composition of the current estate which is comprised of 22 pubs which were open for the full 52 weeks to 26 March 2011, 1 pub operated under a management contract, 8 pubs which were refurbished or acquired during the last financial year and which did not make a full contribution to the financial results of Capital Pubs, and a further 4 pubs which were acquired after the period end.

 

The 22 pubs contributed a House EBITDA of £7.2 million in the 52 weeks to 26 March 2011 and in the first 15 weeks since 27 March 2011 continued to trade strongly delivering like-for-like revenue growth of 6.5 per cent.

 

In addition, Capital Pubs expects to achieve average weekly revenue of approximately £20,000 each on the 12 pubs which have recently been refurbished or acquired by the end of the current financial year, as these units reach maturity.

10.       Management and employees

Following completion, the employee resource of the Capital Pubs Group will be considered as part of Greene King's overall strategy for Capital Pubs and will be reviewed from time to time in light of the on-going requirements of the Capital Pubs Group. It is not currently anticipated that the full Capital Pubs management team will remain in place although discussions between Greene King and Capital Pubs' senior management about team members' specific roles in the enlarged group, and the terms of their employment, have yet to take place.  It is envisaged that such discussions will take place after the Offer is declared wholly unconditional.

 

Greene King has given assurances to the Capital Pubs Directors that, on the Offer becoming or being declared wholly unconditional, the existing employment rights, including pension rights, of all Capital Pubs employees will be fully safeguarded.

 

Greene King has no current intention to change the location of Capital Pubs Group's operational places of business.

 

11.       Capital Pubs Share Schemes

The Offer will extend to any Capital Pubs Shares which are unconditionally allotted or issued fully paid (or credited as fully paid) prior to the date on which the Offer closes (or such earlier date as Greene King may, subject to the Code, decide, not being earlier than the date on which the Offer becomes or is declared unconditional as to acceptances or, if later, the first closing date) including any such shares unconditionally allotted or issued pursuant to the exercise of options/awards under the Capital Pubs Share Schemes.

To the extent that options/awards remain unexercised at the time the Offer becomes or is declared wholly unconditional, appropriate proposals will be made by Greene King to participants in the Capital Pubs Share Schemes once the Offer becomes or is declared wholly unconditional.

12.       Disclosure of interests in Capital Pubs

Save as disclosed above, neither Greene King, any of Greene King Directors, their immediate families or related trusts, nor so far as Greene King is aware any party acting in concert with Greene King, had any interest in or right to subscribe in respect of any relevant securities of Capital Pubs or had any short positions in respect of relevant securities of Capital Pubs, or had borrowed or lent any relevant security of Capital Pubs.  In the interests of secrecy prior to announcement, Greene King has not made any enquiries in this respect of certain parties who may be deemed by the Panel to be acting in concert with it for the purposes of the Offer.  Enquiries of such parties will be made as soon as practicable following the date of this announcement and any material disclosure in respect of such parties will be included in the Offer Document.

13.       Compulsory Acquisition and Cancellation of AIM Admission and
            Re-Registration as a Private Company

If Greene King receives acceptances under the Offer in respect of, or otherwise acquires, 90 per cent. or more in nominal value of Capital Pubs Shares to which the Offer relates and assuming all other conditions of the Offer have been satisfied or waived (if they are capable of being waived), Greene King intends to exercise its rights pursuant to the provisions of sections 979 to 991 (inclusive) of the Companies Act 2006 to acquire compulsorily any remaining Capital Pubs Shares to which the Offer relates on the same terms as the Offer.

Furthermore, if the Offer becomes or is declared unconditional in all respects or Greene King receives sufficient acceptances from Capital Pubs' Shareholders, and/or otherwise acquires more than 75 per cent. of Capital Pubs Shares, Greene King intends to procure that Capital Pubs applies to the London Stock Exchange for the cancellation of the admission of Capital Pubs Shares to trading on AIM. It is anticipated that, subject to any applicable requirements of the London Stock Exchange, such cancellation will take effect no earlier than 20 Business Days after the date on which the Offer becomes or is declared unconditional in all respects or Greene King receives sufficient acceptances from Capital Pubs' Shareholders, and/or otherwise acquires more than 75 per cent. of Capital Pubs Shares.

It is anticipated that the cancellation of the admission of Capital Pubs Shares to trading on AIM would reduce the liquidity and marketability of any Capital Pubs Shares not acquired under the Offer.

Following such cancellation and delisting, Greene King intends to procure that Capital Pubs re-registers from a public limited company to a private limited company under the relevant provisions of the Companies Act 2006.

14.       Inducement Fee

In consideration of Greene King agreeing to announce its firm intention to make the Offer by 5pm on Wednesday 20 July 2011, Capital Pubs has agreed to pay Greene King a fee equal to 1 per cent. of the total cash consideration payable under the Offer for the Capital Pubs Shares on a fully diluted basis (exclusive of VAT) in the event that (a) following this announcement being made, an Independent Inconsistent Transaction is announced before the Offer is made or before the Offer lapses or is withdrawn which is approved or recommended by the Capital Pubs' Board and which subsequently becomes or is declared unconditional in all respects or completes (as relevant) or (b) the Capital Pubs' Board fails to recommend the Offer or withdraws or alters its recommendation of the Offer and the Offer lapses or is withdrawn.

Additionally, Capital Pubs has agreed to discontinue and not to initiate or solicit any discussions in relation to any possible offer for its issued share capital with any third party. Should Capital Pubs or its advisers be approached by a third party with regard to any such possible offer, Capital Pubs has agreed to immediately notify Greene King of such approach and inform the third party of its non-solicitation undertakings. Capital Pubs has further undertaken not to disclose any of its financial and other confidential information to any third party or give access to any member of the management of the Capital Pubs Group to any third party except as required by law or the Code and subject to the Capital Pubs' Board's statutory duties.

The above non-solicitation undertakings will remain in force until Greene King and Capital Pubs agree to terminate their discussions regarding the Offer.

15.       Arrangements in connection with Ensco 600 Limited

Capital Pubs has a 40 per cent. interest in Ensco 600 Limited ("Ensco 600") which owns and operates the freehold pub "The Havelock Tavern". Helen Watson, the wife of Clive Watson, the chief executive officer of Capital Pubs, has a 20 per cent. interest in Ensco 600.  Mrs Watson has, conditional on approval by the Panel of the terms of the option agreement, entered into an option in favour of Capital Pubs to acquire her shares at fair market value to be determined by independent experts.  The option may be exercised by Capital Pubs at any time on or after 1 August 2011, but before 31 March 2012, after which time the option shall automatically lapse.  

If Capital Pubs exercises the option, an offer on the same terms must be made to the shareholders holding the remaining 40 per cent. of Ensco 600, and Clive Watson has agreed to use his best endeavours to procure that any such offer is accepted by those shareholders.

16.       Financing of the Offer

The Offer will be financed out of Greene King's existing cash resources and credit facilities. 

Lazard and Deutsche Bank, financial advisers to Greene King, are satisfied that sufficient resources are available to Greene King to satisfy full acceptance of the Offer.

17.       General

The Offer Document will be posted to Capital Pubs' Shareholders and the Panel as soon as practicable and, in any event (save with the consent of the Panel), within 28 days of the date of this announcement. The Offer Document will also be made available to the employees of Capital Pubs and Greene King or their representatives.

In accordance with Rule 2.10 of the City Code, the current issued share capital of Capital Pubs comprises 26,967,949 ordinary shares of 50 pence each (ISIN number GB00B03QJ181).

The availability of the Offer to persons who are not resident in the United Kingdom may be affected by the laws of their relevant jurisdiction. Such persons should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. Further details in relation to overseas shareholders will be contained in the Offer Document.

The Offer referred to in this document will not be made, directly or indirectly, in, into or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facilities of a nationals securities exchange of, the United States, Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of such jurisdiction.  This document does not constitute an offer in the United States, Canada, Australia or Japan or any such other jurisdiction and the Offer will not be capable of acceptance by any such use, means, instrumentally or facilities or otherwise from or within the United States, Canada, Australia or Japan or any such other jurisdiction.  Accordingly this document is not being, and should not be, mailed, transmitted or otherwise distributed, in whole or in part, in or into or from the United States, Canada, Australia or Japan or any such other jurisdiction.

Capital Pubs' Shareholders (including, without limitation, nominees, trustee or custodians) must not forward this document to the United States, Canada, Australia, Japan or any other such jurisdiction.

This announcement does not constitute an offer or an invitation to purchase any securities.

The Offer will be made solely by the Offer Document and the Form of Acceptance, which will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted.

Appendix IV contains definitions of the terms used in this announcement.

ENQUIRIES

For further information contact:

Greene King

 

Rooney Anand, Chief executive

+ 44 1284 763222

 

 

Lazard (financial adviser to Greene King)

 

William Rucker

+44 207 187 2000

Paul Gismondi

+44 207 187 2000

 

 

Deutsche Bank (financial adviser and corporate broker to Greene King)

 

James Agnew

+44 207 545 8000

Steven Varlakhov

+44 207 545 8000

Andrew Smith

+44 207 545 8000

 

 

Financial Dynamics (PR adviser to Greene King)

 

Ben Foster

+ 44 207 831 3113

 

 

Capital Pubs

 

Clive Watson

+ 44 207 589 4888

Nick Collins

+ 44 207 589 4888

 

 

PricewaterhouseCoopers (financial adviser to Capital Pubs)

 

Sean Williams

+44 207 583 5000

Gerry Young

+44 207 583 5000

Mark Sweeting

+44 207 583 5000

 

 

Panmure Gordon (UK) Limited (corporate broker to Capital Pubs)

 

Adam Pollock

Andrew Godber

+44 207 459 3600

+44 207 459 3600

 

 

College Hill (PR adviser to Capital Pubs)

 

Justine Warren

Matthew Smallwood

+44 207 457 2020

+44 207 457 2020

 

Lazard & Co., Limited is acting exclusively for Greene King in connection with the Offer and will not be responsible to any person other than Greene King for providing the protections afforded to customers of Lazard & Co., Limited or for providing advice in relation to the Offer nor any other matter referred to in this announcement.

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Services Authority. Details about the extent of Deutsche Bank AG's authorisation and regulation by the Financial Services Authority are available on request. Deutsche Bank AG, London Branch is acting as financial adviser and corporate broker to Greene King and no one else in connection with the contents of this announcement and the Offer and will not be responsible to anyone other than Greene King for providing the protections afforded to clients of Deutsche Bank AG, London Branch, nor for providing advice in relation to the Offer or any matters referred to herein.

PricewaterhouseCoopers is acting exclusively for Capital Pubs in connection with the Offer and will not be responsible to any person other than Capital Pubs for providing the protections afforded to clients of PricewaterhouseCoopers nor for providing advice in relation to the Offer nor any other matter referred to in this announcement.

Panmure Gordon (UK) Limited is acting exclusively for Capital Pubs in connection with the Offer and will not be responsible to any person other than Capital Pubs for providing the protections afforded to clients of Panmure Gordon (UK) Limited or for providing advice in relation to the Offer or any other matter referred to in this announcement.

 

APPENDIX I

 

Conditions and Certain Further Terms of the Offer

A.        Conditions Of The Offer

The Offer will be subject to the following conditions:

1.         Acceptances

Valid acceptances being received (and not, where permitted, withdrawn) by no later than 1.00 pm (London time) on the first closing date of the Offer (or, subject to the Code, such later time(s) and/or dates(s) as Greene King may decide) in respect of not less than 90 per cent. of Capital Pubs Shares to which the Offer relates and not less than 90 per cent. of the voting rights carried by those shares (or, in either case, such lower percentage as Greene King may decide). However, this condition will not be satisfied unless Greene King and/or its wholly‑owned subsidiaries have acquired or agreed to acquire Capital Pubs Shares carrying, in aggregate, over 50 per cent. of the voting rights then normally exercisable at general meetings of Capital Pubs including, for this purpose, to the extent (if any) required by the Code, the voting rights attaching to any Capital Pubs Shares which may be unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances. In this condition:

(a)

the expression "Capital Pubs Shares to which the Offer relates" shall be construed in accordance with sections 974 to 991 (inclusive) Companies Act 2006; and

(b)

Capital Pubs Shares which have been unconditionally allotted but not issued shall be deemed to carry the voting rights which they will carry when they are issued; and

(c)

valid acceptances shall be treated as having been received in respect of any Capital Pubs Shares that Greene King Group shall, pursuant to section 979(8) and, if applicable, section 979(9) Companies Act 2006, be treated as having acquired or unconditionally contracted to acquire by virtue of acceptances of the Offer.

2.         Authorisations

(a)

All authorisations in any jurisdiction which Greene King reasonably considers necessary or appropriate for, or in respect of, the Offer, its implementation or any acquisition of any shares in, or control of, Capital Pubs or any other member of the Wider Capital Pubs Group by any member of the Wider Greene King Group having been obtained in terms and in a form satisfactory to Greene King acting reasonably from any relevant person or from any person or body with whom any member of the Wider Capital Pubs Group has entered into contractual arrangements and all such authorisations remaining in full force and effect and there being no intimation of any intention to revoke or not renew the same; and

(b)

all authorisations which Greene King reasonably considers necessary to carry on the business of any member of the Wider Capital Pubs Group remaining in full force and effect and there being no intimation of any intention to revoke or not to renew the same; and

(c)

all filings which Greene King reasonably considers necessary having been made and all applicable waiting and other periods having expired, lapsed or been terminated and all applicable statutory or regulatory obligations in any jurisdiction having been complied with.

3.         Regulatory Intervention

No relevant person having taken, instituted, implemented or threatened any legal proceedings, or having required any action to be taken or otherwise having done anything or having enacted, made or proposed any statute, regulation, order or decision or taken any other step and there not continuing to be outstanding any statute, regulation, order or decision which in each case is or is likely to be material in the context of the Offer and which would or might reasonably be expected to:

(a)

make the Offer, its implementation or the acquisition or proposed acquisition of any shares in, or control or management of, the Wider Capital Pubs Group by Greene King illegal, void or unenforceable; or

(b)

otherwise directly or indirectly prevent, prohibit or otherwise materially restrict, restrain, delay or interfere in the implementation of or impose additional conditions or obligations with respect to or otherwise challenge or require amendment of the Offer or the proposed acquisition of Capital Pubs by Greene King or any acquisition of shares in Capital Pubs by Greene King; or

(c)

require, prevent or materially delay the divestiture by Greene King of any shares or other securities in Capital Pubs; or

(d)

impose any material limitation on the ability of any member of the Wider Greene King Group or any member of the Wider Capital Pubs Group to acquire or hold or exercise effectively, directly or indirectly, any rights of ownership of shares or other securities or the equivalent in any member of the Wider Capital Pubs Group or management control over any member of the Wider Capital Pubs Group; or

(e)

require, prevent or materially delay the disposal by Capital Pubs or any member of the Wider Greene King Group, or require the disposal or alter the terms of any proposed disposal by any member of the Wider Capital Pubs Group, of all or any part of their respective businesses, assets or properties or impose any limitation on the ability of any of them to conduct their respective businesses or own their respective assets or properties; or

(f)

require any member of the Wider Greene King Group or of the Wider Capital Pubs Group to offer to acquire any shares or other securities (or the equivalent) in any member of the Wider Capital Pubs Group or any member of the Wider Greene King Group owned by any third party (in each case, other than in implementation of the Offer); or

(g)

impose any limitation on the ability of any member of the Wider Greene King Group or the Wider Capital Pubs Group to integrate or co‑ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Capital Pubs Group and/or the Wider Capital Pubs Group; or

(h)

result in any member of the Wider Greene King Group or the Wider Capital Pubs Group ceasing to be able to carry on business under any name under which it presently does so; or

(i)

otherwise adversely affect any or all of the businesses, assets, prospects or profits of any member of the Wider Greene King Group or the Wider Capital Pubs Group;


and all applicable waiting and other time periods during which any such relevant person could institute, or implement or threaten any legal proceedings, having expired, lapsed or been terminated.

4.         Consequences Of The Offer

Except as disclosed in Capital Pubs' annual report and accounts for the year ended 26 March 2011 or as publicly announced by Capital Pubs prior to the Announcement Date (by the delivery of an announcement to a Regulatory Information Service), there being no provision of any agreements to which any member of the Wider Capital Pubs Group is a party, or by or to which any such member, or any part of its assets, may be bound, entitled or subject, which would or might, in each case as a consequence of the Offer or of the acquisition or proposed acquisition of all or any part of the issued share capital of, or change of control or management of, Capital Pubs or any other member of the Capital Pubs Group reasonably be expected to result in (in each case to an extent which would be material in the context of the Wider Capital Pubs Group taken as a whole):

(a)

any material assets or interests of any member of the Wider Capital Pubs Group being or falling to be disposed of or charged in any way or ceasing to be available to any member of the Wider Capital Pubs Group or any rights arising under which any such asset or interest could be required to be disposed of or charged in any way or could cease to be available to any member of the Wider Capital Pubs Group; or

(b)

any moneys borrowed by or other indebtedness (actual or contingent) of, or any grant available to, any member of the Wider Capital Pubs Group being or becoming repayable or capable of being declared repayable immediately or earlier than the repayment date stated in such agreement or the ability of such member of the Wider Capital Pubs Group to incur any such borrowing or indebtedness becoming or being capable of becoming withdrawn, inhibited or prohibited; or

(c)

any such agreement or the rights, liabilities, obligations or interests of any such member under it being terminated or adversely modified or affected or any onerous obligation arising or any adverse action being taken under it; or

(d)

the interests or business of any such member in or with any third party (or any arrangements relating to any such interests or business) being terminated or adversely modified or affected; or

(e)

the financial or trading position or prospects or value of any member of the Wider Capital Pubs Group being prejudiced or adversely affected; or

(f)

the creation of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider Capital Pubs Group or any such security (whenever arising or having arisen) becoming enforceable or being enforced; or

(g)

any member of the Wider Capital Pubs Group ceasing to be able to carry on business under any name under which or on the terms on which it currently does so or any person presently not able to carry on business under any name under which any member of the Wider Capital Pubs Group currently does becoming able to do so; or

(h)

the creation of actual or contingent liabilities by any member of the Wider Capital Pubs Group other than in the ordinary course of business; or

(i)

the ability of any member of the Greene King Group to carry on its business being adversely affected in any material respect,

and no event having occurred which, under any provision of any such agreement to which any member of the Wider Capital Pubs Group is a party, or by or to which any such member, or any of its assets, may be bound, entitled or subject, could result, in any of the events or circumstances as are referred to in subparagraphs (a) to (i) inclusive.

5.         No Corporate Action Taken Since The Accounting Date

Since the Accounting Date, except as disclosed in Capital Pubs' annual report and accounts for the year ended 26 March 2011 or as publicly announced by Capital Pubs prior to the Announcement Date (by the delivery of an announcement to a Regulatory Information Service) and save pursuant to transactions in favour of Capital Pubs or a wholly‑owned subsidiary of Capital Pubs, no member of the Wider Capital Pubs Group having:

(a)

issued or agreed to issue or authorised or proposed the issue or grant of additional shares of any class or securities convertible into or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save pursuant to the Capital Pubs Share Schemes); or

(b)

redeemed, purchased, repaid or reduced or proposed the redemption, purchase, repayment or reduction of any part of its share capital or made or proposed the making of any other change to its share capital; or

(c)

recommended, declared, paid or made or proposed to recommend, declare, pay or make any dividend, bonus issue or other distribution whether payable in cash or otherwise save in respect of the proposed final dividend payable to Capital Pubs' Shareholders which Capital Pubs' Board announced on 21 June 2011 which will no longer be proposed and the AGM, which was originally proposed to be held on 17 August 2011, has been deferred; or

(d)

merged or demerged with or from, or acquired, any body corporate or authorised or proposed or announced any intention to propose any such merger or demerger; or

(e)

other than in the ordinary course of business acquired or disposed of, transferred, mortgaged or charged, or created or granted any security interest over, any assets (including shares and trade investments) or authorised or proposed or announced any intention to propose any acquisition, disposal, transfer, mortgage, charge or creation or grant of any security interest; or

(f)

issued or authorised or proposed the issue of any debentures or incurred or increased any borrowings, indebtedness or liability (actual or contingent); or

(g)

entered into or varied, or authorised or proposed the entry into or variation of, or announced its intention to enter into or vary, any transaction, arrangement, contract or commitment (whether in respect of capital expenditure or otherwise) which is of a long term, onerous or unusual nature or magnitude or could involve an obligation of such nature or magnitude or which is or could be restrictive to the existing business of any member of the Wider Capital Pubs Group or which is other than in the ordinary course of business; or

(h)

entered into, implemented, effected, authorised or proposed or announced its intention to enter into, implement, effect, authorise or propose any contract, reconstruction, amalgamation, scheme, commitment or other transaction or arrangement otherwise than in the ordinary course of business; or

(i)

waived or compromised any claim; or

(j)

entered into or varied or made any offer (which remains open for acceptance) to enter into or vary the terms of any contract with any of the directors or senior executives of Capital Pubs or any of the directors or senior executives of any other member of the Wider Capital Pubs Group; or

(k)

taken or proposed any corporate action or had any legal proceedings instituted or threatened against it or petition presented for its winding‑up (voluntary or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets and revenues or for any analogous proceedings or steps in any jurisdiction or for the appointment of any analogous person in any jurisdiction; or

(l)

been unable, or admitted in writing that it is unable, to pay its debts or has stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business; or

(m)

made any alteration to its articles of association, or other incorporation documents; or

(n)

in relation to the pension schemes established for its directors and/or other employees and/or their dependants, made or consented to any change to:


(i)

the terms of the trust deeds constituting such pension schemes or to the benefits which accrue;


(ii)

the pensions which are payable, under them;


(iii)

the basis on which qualifications for or accrual of or entitlement to such benefits or pensions are calculated or determined;


(iv)

the basis upon which the liabilities (including pensions) of such pension schemes are funded or made;


(v)

or agreed or consented to any change to the trustees of such pension schemes; or

(o)

entered into any agreement or passed any resolution or made any offer (which remains open for acceptance) or proposed or announced any intention with respect to any of the transactions, matters or events referred to in this condition 5.

 

6.         Other Events Since the Accounting Date

In the period since the Accounting Date and except as disclosed in Capital Pubs' annual report and accounts for the year ended 26 March 2011 or as publicly announced by Capital Pubs prior to the Announcement Date (by the delivery of an announcement to a Regulatory Information Service):

(a)

no litigation or arbitration proceedings, prosecution, investigation or other legal proceedings having been announced, instituted, threatened or remaining outstanding by, against or in respect of, any member of the Wider Capital Pubs Group or to which any member of the Wider Capital Pubs Group is or may become a party (whether as claimant, defendant or otherwise); or

(b)

no adverse change or deterioration having occurred in the business or assets or financial or trading position or prospects, assets or profits of any member of the Wider Capital Pubs Group; or

(c)

(other than as a result of the Offer) no enquiry or investigation by, or complaint or reference to, any relevant person against or in respect of any member of the Wider Capital Pubs Group having been threatened, announced, implemented or instituted or remaining outstanding by, against or in respect of, any member of the Wider Capital Pubs Group; or

(d)

no contingent or other liability having arisen or become apparent or increased

in each case to an extent which would be material in the context of the Wider Capital Pubs Group taken as a whole.

7.         Environmental and Other Issues

Greene King not having discovered that that (in each case to an extent which would be material in the context of the Wider Capital Pubs Group taken as a whole):

Environmental

(a)

any past or present member of the Wider Capital Pubs Group has not complied in a material respect with all applicable legislation or regulations or authorisations of any jurisdiction with regard to the use, handling, storage, transport, production, supply, treatment, keeping, disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to damage or impair the environment or harm human health or otherwise relating to environmental matters or the health and safety of any person or that there has otherwise been any such use, handling, storage, transport, production, supply, treatment, keeping, disposal, discharge, spillage, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations or authorisations and wherever the same may have taken place), which, in any such case, would be likely to give rise to any liability (whether actual or contingent) or cost on the part of any member of the Wider Capital Pubs Group; or

(b)

there has been a material disposal, discharge, release, spillage, leak or emission of any waste or hazardous substance or any substance likely to damage or impair the environment or harm human health which would be likely to give rise to any liability (whether actual or contingent) or cost on the part of any member of the Wider Capital Pubs Group; or

(c)

there is, or is likely to be any liability (whether actual or contingent) or cost on the part of any member of the Wider Capital Pubs Group to make good, repair, reinstate or clean up any relevant asset or any other property or any controlled waters under any environmental legislation, regulation, notice, circular, order or other lawful requirement of any relevant person or third party or otherwise; or

(d)

circumstances exist (whether as a result of the making of the Offer or otherwise):


(i)

which would be likely to lead to any relevant person instituting; or


(ii)

whereby any past or present member of the Wider Capital Pubs Group would be likely to be required to institute;

 

an environmental audit or take any steps which would in any such case be likely to result in any actual or contingent liability to improve or modify existing plant or install new plant, machinery or equipment or make good, repair, reinstate or clean up any relevant asset;

Product Liability

(e)

circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any past or present member of the Wider Capital Pubs Group;

Information

(f)

the financial, business or other information disclosed at any time by any member of the Wider Capital Pubs Group, whether publicly or in the context of the Offer either contained a material misrepresentation of fact or omitted to state a fact necessary to make the information disclosed not materially misleading; or

(g)

any contingent liability disclosed in such disclosed information would or might materially and adversely affect, directly or indirectly, the business, profits or prospects of the Wider Capital Pubs Group taken as a whole; or

(h)

any information disclosed at any time by or on behalf of any member of the Wider Capital Pubs Group is or becomes materially incorrect; or

(i)

any information which affects the import of any information disclosed at any time by or on behalf of any member of the Wider Capital Pubs Group to an extent which is material in the context of the Wider Capital Pubs Group taken as a whole;

Accounts

(j)

any member of the Wider Capital Pubs Group is subject to any liability, contingent or  otherwise;

Intellectual Property

(k)

any member of the Wider Capital Pubs Group does not own or have licensed to it or otherwise possess legally enforceable rights to use all intellectual property that is:


(i)

required or reasonably necessary for the conduct of business of the relevant member of the Wider Capital Pubs Group as currently conducted; or


(ii)

under development for such business;

(l)

any member of the Wider Capital Pubs Group has infringed, any intellectual property rights of any third party; or

(m)

any claims have been asserted in writing or threatened in writing by any person:


(i)

that the Wider Capital Pubs Group infringes any intellectual property of any third party; or


(ii)

challenging the ownership of any member of the Wider Capital Pubs Group to, or the validity or effectiveness of, any of its intellectual property;

(n)

any intellectual property held by any member of the Wider Capital Pubs Group is not valid and subsisting; or

(o)

there is material unauthorised use, infringement or misappropriation of any intellectual property of any member of the Wider Capital Pubs Group by any third party; or

(p)

any persons who are now, or within the last five years have been, employees, consultants or contractors of any member of the Wider Capital Pubs Group have failed to execute proprietary information and confidentiality agreements; or

Criminal Property

(q)

any asset of any member of the Wider Capital Pubs Group constitutes criminal property as defined by section 340(3) Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition).

B.         Certain Further Terms of the Offer

The conditions are inserted for the benefit of Greene King and no Capital Pubs Shareholder shall be entitled to waive any of the conditions without the prior consent of Greene King.

Subject to the requirements of the Panel, Greene King reserves the right to waive all or any of conditions 2 to 7 (inclusive) in whole or in part;

Each of conditions 1 to 7 shall be regarded as a separate condition and shall not be limited by reference to any other condition.

The Offer will lapse if the proposed acquisition of Capital Pubs is referred to the Competition Commission or if the European Commission either initiates proceedings under Article 6(1)(c) of the ECMR or makes a referral to a competent authority of the United Kingdom under Article 9(1) of the ECMR before 1.00 pm on the first closing date or the time and date on which the Offer becomes or is declared unconditional as to acceptances (whichever is the later).

If the Offer lapses, it will cease to be capable of further acceptance and persons accepting the Offer and Greene King shall thereupon cease to be bound by acceptances submitted before the time the Offer lapses.

The Offer will lapse unless all of the conditions relating to the Offer have been fulfilled or (if capable of waiver) waived by, or, where appropriate, have been determined by Greene King to be and remain satisfied by, midnight on the twenty first day after the later of:

(a)

the first closing date; or

(b)

the date on which the Offer becomes unconditional as to acceptances

or such later date as Greene King may, with the consent of the Panel, decide. Greene King shall be under no obligation to waive or treat as satisfied any condition by a date earlier than the latest date specified above for its satisfaction even though the other conditions of the Offer may, at such earlier date, have been waived or fulfilled and there are, at such earlier date, no circumstances indicating that any such conditions may not be capable of fulfilment.

If Greene King is required by the Panel to make an offer for Capital Pubs Shares under Rule 9 of the Code, Greene King may make such alterations to the conditions of the Offer set out above, including condition 1, as are necessary to comply with that Rule; 

Capital Pubs Shares will be acquired by Greene King fully paid and free from all liens, equities, charges, equitable interests, encumbrances, rights of pre‑emption and any other third party right and/or interests of any nature whatsoever and together with all rights attaching to them, now or in the future, including the right to receive and retain all dividends, interest and other distributions declared, paid or made after the Announcement Date.

The Offer will not be made, directly or indirectly, in, into or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically, or electronically) of interstate or foreign commerce of, or any facilities of a national securities exchange of, the United States, Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of such jurisdiction.  This document does not constitute an offer in the United States, Canada, Australia or Japan or any such other jurisdiction and the Offer should not be accepted by any such use, means, instrumentality or facilities or otherwise from or within the United States, Canada, Australia or Japan or any such other jurisdiction.  Accordingly, copies of this document are not being and must not be mailed, transmitted or otherwise distributed in whole or in part, in, into or from the United States, Canada, Australia or Japan or any such other jurisdiction and persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in, into or from the United States, Canada, Australia or Japan. or any such other jurisdiction. Doing so may render invalid any purported acceptance of the Offer.

The Offer will comply with English law and the Code.

 

APPENDIX II

Sources and Bases of Information

Unless otherwise stated in this announcement:

1.

The financial information relating to Greene King is extracted from audited consolidated statements of Greene King for relevant years, prepared in accordance with IFRS.

2.

The financial information relating to Capital Pubs is extracted from the audited consolidated financial statements of Capital Pubs for the relevant years, prepared in accordance with IFRS.

3.

As at the close of business on 18 July 2011, being the last Business Day prior to this announcement, there were 26,967,949 Capital Pubs shares in issue, based on the announcement released by Capital Pubs on 17 June 2011 in accordance with Rule 2.10 of the Code.

4.

The fully diluted share capital of Capital Pubs (being 30,582,080 Capital Pubs Shares) is calculated upon the basis of:

 

·      the current issued share capital of Capital Pubs as referred to in paragraph 3 above; and

·      a further 3,614,131 Capital Pubs Shares which may be issued on or after the date of this announcement (mainly in connection with the Capital Pubs Share Schemes).

5

The value of the entire issued and to be issued share capital of Capital Pubs under the terms of the Offer is based on the offer price of 235 pence per Capital Pubs Share and fully diluted share capital of Capital Pubs as set out in 4 above, less potential cash proceeds of £1,779,150 resulting from the issue of Capital Pubs Shares which may be issued on or after the date of this announcement (mainly in connection with the Capital Pubs Share Schemes).

6.

All prices for Capital Pubs Shares have been derived from the Daily Official List of the London Stock Exchange and represent Closing Prices on the relevant date(s).

7.

The premium calculations to the price per Capital Pubs Share have been calculated by reference to:

 

·      a price of 155.5 pence per Capital Pubs Share, being the closing price on 16 June 2011, the last business day prior to the announcement by Fuller, Smith & Turner plc that it had approached Capital Pubs' Board in relation to a possible offer for Capital Pubs, as derived from data provided by the London Stock Exchange; and

·      a price of 138 pence per Capital Pubs Share, being the average closing price over the six month period from 17 December 2010 until 16 June 2011, as derived from data provided by Datastream.

8.

The enterprise value implied by the Offer is calculated upon the basis of:

 

·      the fully diluted equity value as set out in 5 above;

·      the following items disclosed on Capital Pubs' 26 March 2011 balance sheet: (i) long term debt of £24.8 million; (ii) short term debt of £1.2 million; and (iii) cash and cash equivalents of £4.8 million; and

·      the following adjustments in the period 26 March 2011 to 14 July 2011 totalling £2.0 million, sourced from Capital Pubs' management accounts: (i) loan prepayments (non cash movement) of £0.2 million; and (ii) cash outflow of £1.9 million.

 

 

APPENDIX III

Details of Irrevocable Undertakings

 

Greene King has received irrevocable undertakings to accept the Offer or to procure that any other person accepts the Offer from the directors of Capital Pubs and any other person whose interests in Capital Pubs Shares a director is taken to be interested in pursuant to Part 22 of the Companies Act 2006 in respect of 2,634,650 Capital Pubs Shares, being all of the Capital Pubs Shares in which they are interested, representing approximately 9.77 per cent. of the current issued share capital of Capital Pubs. The directors of Capital Pubs who have given irrevocable undertakings are as follows:

Name

Number of Capital Pubs Shares

Percentage of current issued share capital (%)

C Watson

2,035,889

7.55

D Bruce

170,924

0.63

J Bruxner

47,050

0.17

R Prickett

95,787

0.36

N Collins

260,000

0.96

A Derrick

25,000

0.09

Total

2,634,650

9.77

The above irrevocable undertakings will only cease to be binding in the event that the Offer Document is not posted within 28 days of the date of this announcement or within such longer period as Greene King, with the consent of the Panel, determines or the Offer lapses or is withdrawn.

In addition, Greene King has received irrevocable undertakings to accept the Offer or to procure that any other person accepts the Offer from certain other Capital Pubs' Shareholders representing, in aggregate, approximately 23.91 per cent. of the current issued share capital of Capital Pubs. Capital Pubs' Shareholders who have given irrevocable undertakings are as follows:

Name

Number of Capital Pubs Shares

Percentage of current issued share capital (%)

MREF II Investments Limited

3,066,865

11.37

R Keeling

1,400,000

5.19

Hargreave Hale Limited

1,270,000

4.71

S Collins

685,620

2.54

P McDonald

26,041

0.10

Total

6,448,526

23.91

This means that in aggregate, Greene King has received irrevocable undertakings to accept the Offer, or to procure that any other person accepts the Offer, in respect of a total of 9,083,176 Capital Pubs Shares, representing approximately 33.68 per cent. of the issued share capital of Capital Pubs.  All of these undertakings would remain binding in the event that a competing offer is made. 

 

APPENDIX IV

Definitions

DEFINITIONS

For the purposes of these conditions the following expressions have the following meaning:

"Accounting Date"

26 March 2011

"AIM"

the Alternative Investment Market of the London Stock Exchange

"Announcement Date"

19 July 2011

"agreements"

arrangements, agreements, commitments, licences, permits, franchises, partnerships, joint ventures, authorisations or other instrument

"authorisations"

authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals

"Board"

board of directors

"Capital Pubs"

The Capital Pub Company Plc

"Capital Pubs' Board" or  "Capital Pubs Directors"

the board of directors of Capital Pubs

"Capital Pubs Group"

Capital Pubs, its subsidiaries and subsidiary undertakings

"Capital Pubs Shareholder"

holder of Capital Pubs Shares

"Capital Pubs Shares"

the existing unconditionally allotted or issued and fully paid ordinary shares of 50 pence each of Capital Pubs and any further such shares which are unconditionally allotted or issued fully paid, or credited as fully paid, before the date on which the Offer closes (or before such earlier date as Greene King may, subject to the Code, decide, not being earlier than (a) the date on which the Offer becomes or is declared unconditional as to acceptances or (b), if later, the first closing date of the Offer)

"Capital Pubs Share Schemes"

each of the Capital Pubs Approved Company Share Option Plan, the Capital Pubs Unapproved Option Plan, the Capital Pubs Share Incentive Plan, the Capital Pubs Joint Share Ownership Plan and/or the Capital Pubs Management Incentive Plan

"Code" or "City Code"

the City Code on Takeovers and Mergers as from time to time interpreted by the Panel

"the Companies Act 2006"

the Companies Act 2006, as amended

"Deutsche Bank"

Deutsche Bank AG, London branch

"Disclosed"

fairly disclosed in writing by or on behalf of Capital Pubs to Greene King or its advisers

"first closing date"

the date falling 21 days after the date on which the Offer Document is posted

"Form of Acceptance"

the form of acceptance, election and authority relating to the Offer which will accompany the Offer Document

"FSA"

the Financial Services Authority

"Greene King"

Greene King plc

"Greene King Board" or "Greene King Directors"

the board of directors of Greene King

"Greene King Group"

Greene King, its subsidiaries and subsidiary undertakings

"House EBITDA"

earnings before interest, taxes, depreciation and amortisation, and head office costs

"Independent Inconsistent Transaction"

either

an offer, scheme of arrangement, recapitalisation or other transaction which involves a change of control (as defined in the Code) of Capital Pubs;

or

any arrangement or transaction which involves or contemplates the transfer of any interest in the whole, or substantially the whole, of the undertaking, assets and/or business of Capital Pubs or Capital Pubs Group;

or

any other arrangement or transaction or series of the same which is inconsistent with the Offer and which requires the approval of the shareholders of Capital Pubs,

which is in each case to be made or entered into by a third party which is not acting in concert (as defined in the Code) with Greene King

"intellectual property"

all patents, trademarks, trade names, service marks, copyrights, designs, databases and any applications therefore, schematics, technology, know‑how, computer software, programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material

"Lazard"

Lazard & Co., Limited of 50 Stratton Street, London W1J 8LL

"legal proceedings"

actions, suits, proceedings, investigations, references or enquiries

"Listing Rules"

the listing rules made by the FSA under Part VI of the Financial Services and Markets Act 2000

"London Stock Exchange"

London Stock Exchange plc

"Offer"

the recommended offer to be made by Greene King to acquire all of the issued and to be issued Capital Pubs Shares on the terms and subject to the conditions to be set out in the Offer Document and the Form of Acceptance and, where the context so requires, any subsequent revision, variation, extension or renewal thereof

"Offer Document"

the document to be sent to Capital Pubs' Shareholders which will contain the Offer

"Offer Period"

the period commencing on 17 June 2011

"Offer Price"

235 pence in cash per Capital Pubs Share

"Official List"

the Official List maintained by the FSA

"Panel"

the Panel on Takeovers and Mergers

"Publicly Announced"

specifically disclosed in the annual report and accounts of Capital Pubs for the year ended on the Accounting Date or in this announcement or in any other announcement made to a Regulatory Information Service since the date of publication of such report and accounts and prior to the Announcement Date

"PricewaterhouseCoopers"

PricewaterhouseCoopers LLP

"Regulatory Information Service"

as defined in the Listing Rules

"relevant asset"

land, property or other asset now or previously owned, occupied or made use of by any past or present member of the Wider Capital Pubs Group

"relevant persons"

governments, governmental, quasi‑governmental, supra-national, statutory, investigative, regulatory or administrative bodies or trade agencies, associations, institutions or courts, or professional or environmental bodies, or any other persons or bodies whatsoever in any jurisdiction

"substantial interest"

a direct or indirect interest in 20 per cent. or more of the equity capital of an undertaking

"third party"

person, firm, company or body

"treasury shares"

treasury shares (as defined in section 974(6) of the Companies Act 2006) of Capital Pubs

"United States"

the United States of America, its territories and possessions, any state of the United States and the District of Columbia and all other areas subject to its jurisdiction

"Wider Greene King Group"

Greene King and its subsidiaries, subsidiary undertakings, associated undertakings and any other undertakings in which Greene King and/or such subsidiaries or undertakings (aggregating their interests) have a substantial  interest

"Wider Capital Pubs Group"

Capital Pubs and its subsidiaries, subsidiary undertakings, associated undertakings and any other undertakings in which Capital Pubs and/or such subsidiaries or undertakings (aggregating their interests) have a substantial interest

 

In this document:

the expressions "subsidiary", "associated undertaking", "subsidiary undertaking" and "undertaking" have the meanings given by the Companies Act 2006; and

references to time are to London time.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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